Tax & Invoicing
Small Business Exemption vs. Standard VAT
§ 19 UStG or standard VAT? The choice has far-reaching consequences for invoicing, VAT and growth strategy. A structured comparison for founders and freelancers.
| Criterion | Small Business Exemption (§ 19 UStG) | Standard VAT (with VAT disclosure) |
|---|---|---|
| Turnover threshold (from 2024) | ≤ €25,000 in previous year; ≤ €100,000 in current year (new thresholds from 2025) | No limit — applies from the first euro of turnover, voluntarily or when exceeded |
| VAT disclosure on invoice | Prohibited — reference to § 19 UStG mandatory | Mandatory — tax rate (7% or 19%) and tax amount |
| Input VAT deduction | Not possible — paid VAT is a cost factor | Full input VAT deduction possible |
| VAT pre-registration (Voranmeldung) | Not required (exempt) | Monthly or quarterly, plus annual return |
| Advantage for private customers | Lower gross prices — no VAT surcharge | No advantage for private customers (gross price higher) |
| Advantage for B2B customers | No advantage — B2B customers cannot reclaim input VAT | B2B customers can reclaim input VAT — cheaper net |
| E-invoice issuance duty (B2B from 2025) | No — small businesses may continue issuing other invoice types | Yes — from 2025 e-invoices must be accepted; issuance duty follows |
| Opt-out possible | Yes — waiver of small business exemption possible anytime (5-year tie-in) | Mandatory when threshold exceeded; no free choice |
| Accounting effort | Low — no VAT filings, simpler bookkeeping | Higher — regular VAT pre-filings, annual return |
Verdict
The small business exemption is worthwhile mainly for founders with predominantly private customers and low investment needs — less bureaucracy, cheaper prices for end consumers. As soon as B2B customers dominate, capital-intensive purchases are planned or turnover grows, standard VAT becomes more advantageous. The switch should be well considered, as waiving the small business exemption is binding for 5 years.
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